[V]ermont could be losing $250 million a year to theft and fraud, according to an expert who voiced support Thursday for the creation of a State Ethics Commission.
Michael Palmer, the president of Ethics By Design in Middlebury and the author of three books on ethics, said the average organization, including government entities, loses 5 percent of their income annually to theft and fraud.
Based on Vermont government spending of more than $5 billion every year, Palmer, a lawyer, pegged the state losses at $250 million through corruption and misconduct. He said there was no reason to think Vermont government was faring better than the average business or government entity.
“There is no reason to believe that Vermont is immune,” he told members of the Senate Government Operations Committee.
Palmer’s testimony came as lawmakers consider — for the second year in a row — establishing a state ethics commission that would take in complaints and refer them to other agencies for enforcement. The commission would have a part-time director and no investigators.
Even if the misappropriation were only 1 percent, Palmer said, that would amount to $50 million each year.
Palmer likened corruption to hypertension, a killer if left untreated.
“You can’t see high blood pressure. Generally, there are no symptoms until it’s too late,” Palmer said. “But you can do something about it. You can check to see whether you have it. If you have it, medicine can help you get it under control.”
He said part of the problem is Vermont lacks a code of conduct. It is not clear, he said, what is allowed, while at the federal level there are specific prohibitions that, for example, disallow the purchase of a cup of coffee for a federal employee to avoid influence.
Sen. Jeanette White, the chair of Government Operations, said she doubted the scale of corruption envisioned by Palmer.
“I think it’s way out of reach, too high,” White, D-Windham, said Friday. Fellow committee member, Sen. Alison Clarkson, D-Windsor, also said the $250 million figure sounded too high.
Palmer suggested the state set up a telephone hotline to file ethics complaints, but White and Clarkson said they did not support that idea. Clarkson said it would “cast too wide a net” and White said it would draw in complaints beyond ethics. Palmer said a hotline could be hosted for $20,000 a year with a $28,000 setup cost. Palmer also maintained an executive director could be found who would work for free.
Under the legislation, the ethics commission would oversee complaints about conflicts of interest and ethical breaches. The complaints would be referred by the executive director to the attorney general or the state Human Resources Department. The rules would apply to statewide office holders, candidates and top level administration officials. Among the provisions in the bill would be a restriction on lawmakers and high-level executives from lobbying for one year after leaving office.
Last year, the Senate passed an ethics bill late in the session and the House did not have time to consider it. White vowed to make passing another ethics bill a top priority this year. The bill proposed at the beginning of this year was essentially the same as passed last year, with the addition of a restrictions on campaign contributions by those who have contracts with the state.
White said she hopes to have a bill voted out of her committee next week.
The scope and authority of the commission has been debated. Secretary of State Jim Condos has called for a more robust commission with investigators and enforcement powers. Senators on the committee have said they want a smaller commission and to expand it later if necessary.
The bill contemplates spending $100,000 a year, mostly for the part-time director, who would serve under a five-member commission. The commission would issue a report to lawmakers on what kinds of complaints were received.
Condos put the cost for a stronger commission at $300,000.
Committee members went through the bill on Friday section by section. Among the issues discussed, senators agree to include spouses and domestic partners in income reporting requirements for statewide and legislative candidates. The source, but not the amount, of income of $10,000 or more would have to be disclosed for both candidates and their partners.
Senators also wrestled whether they could legally take a candidate off the ballot if they failed to file the financial disclosure form, as contemplated in the bill. According to legislative counsel Betsy Wrask, other states have ballot prohibitions. Sen. Chris Pearson, P/D-Chittenden, and White opposed the ballot prohibition for candidates that don’t file, while Clarkson supported keeping it in.
“People say this bill is toothless. This is some teeth,” Clarkson said.
Senators were also unable Friday to resolve language on a key section of the bill: the “pay to play” prohibition, designed to stop contractors who do or want to do business with the state from making political contributions. Senators considered a minimum threshold of $100,000 for contracts for the provision to take effect but reached no agreement.
Whether to include municipal employees under the commission rules was also debated. Senators seemed to be inclined to start with state employees and possibly expand the commission’s jurisdiction in the future to cover municipal employees if needed. Witnesses, including Condos, have said the largest number of ethical questions involve local officials, such as selectboard members with town contracts.
